Gulf of Mexico lease sale: Disappointing, but not surprising

The Department of the Interior’s (DOI) oil and gas lease sale for the Western Gulf of Mexico held Wednesday attracted little attention from the industry, as only five oil companies submitted their bids.

A total of 4,083 unleased blocks, covering about 21.9 million acres were offered in the Lease Sale 246, however, the five companies only submitted 33 bids on 33 tracts, covering about 190,080 acres. The sum of all bids received totaled $22,675,212.

The companies that took part in the bidding were: Anadarko, BHP Billiton, BP, Peregrine Oil & Gas and Ecopetrol. Of the 33 submitted bids, BHP Billiton submitted 26, committing to pay $16,295,088. The highest bid for a single block came from EcoPetrol, which offered $2.8 million ($4 million in total).

“While this sale reflects today’s market conditions and industry’s current development strategy, it underscores a steady, continued interest in developing deep water federal offshore oil and gas resources.”

Disappointing, but not surprising

Randall Luthi, president of The National Ocean Industries Association (NOIA) said the lease sale was disappointing but not surprising, as it accurately reflected the environment of low commodity prices and increasing regulatory changes and uncertainty.

“The entire oil and natural gas industry, particularly the offshore segment, is understandably being very cautious about spending money. The companies that did participate in this sale should be appreciated for their faith in a bright energy future and in the potential of the Gulf of Mexico in spite of discouraging market and other conditions,” Luthi said.

He added: “Each lease purchased shows a commitment to job creation, economic growth and increased energy security. This commitment comes in spite of mixed energy messages coming out of Washington D.C. Just this week, Shell was given its final permit to drill off Alaska, but the next day, potentially costly and devastating methane regulations were proposed and a leading presidential candidate announced her opposition to drilling in the Arctic, completely dismissing the regulatory and safety mechanisms in place.”

“As other countries continue to open up their offshore oil and natural gas resources, the U.S. should truly be concentrating on a broad energy policy, firmly based upon the wise and continued development of fossil fuels and complemented by renewables. Today’s lease sale was quick, quiet and small, but it is still a step in the right direction and will create jobs, boost economic activity, and strengthen US energy security. We are hopeful that policy makers in Washington will acknowledge these benefits and validate their importance to our nation’s economic and energy health by opening up new offshore areas for exploration and development.”